Following are excerpts from President Bush's speech last night to the Army War College in Carlisle, Pa.:

I've come here tonight to report to all Americans, and to the Iraqi people, on the strategy our nation is pursuing in Iraq and the specific steps we're taking to achieve our goals. . . .

The return of tyranny to Iraq would be an unprecedented terrorist victory and a cause for killers to rejoice. It would also embolden the terrorists, leading to more bombings, more beheadings and more murders of the innocent around the world.

The rise of a free and self-governing Iraq will deny terrorists a base of operation, discredit their narrow ideology and give momentum to reformers across the region. This will be a decisive blow to terrorism at the heart of its power and a victory for the security of America and the civilized world. . . .

The swift removal of Saddam Hussein's regime last spring had an unintended effect. Instead of being killed or captured on the battlefield, some of Saddam's elite guards shed their uniforms and melted into the civilian population.

These elements of Saddam's repressive regime and secret police have reorganized, rearmed and adopted sophisticated terrorist tactics. . . . They hope to wear out the patience of Americans, our coalition and Iraqis before the arrival of effective self-government and before Iraqis have the capability to defend their freedom.

Iraq now faces a critical moment. As the Iraqi people move closer to governing themselves, the terrorists are likely to become more active and more brutal.

There are difficult days ahead, and the way forward may sometimes appear chaotic. Yet our coalition is strong and our efforts are focused and unrelenting, and no power of the enemy will stop Iraq's progress.

Helping construct a stable democracy after decades of dictatorship is a massive undertaking. Yet we have a great advantage. Whenever people are given a choice in the matter, they prefer lives of freedom to lives of fear. . . .

Our agenda . . . is freedom and independence, security and prosperity for the Iraqi people. And by removing a source of terrorist violence and instability in the Middle East, we also make our own country more secure.

Our coalition has a clear goal, understood by all: to see the Iraqi people in charge of Iraq for the first time in generations. . . .

Five Steps

There are five steps in our plan to help Iraq achieve democracy and freedom: We will hand over authority to a sovereign Iraqi government; help establish security; continue rebuilding Iraq's infrastructure; encourage more international support; and move toward a national election that will bring forward new leaders empowered by the Iraqi people.

The first of these steps will occur next month, when our coalition will transfer full sovereignty to a government of Iraqi citizens who will prepare the way for national elections. . . .

The third step in the plan for Iraqi democracy is to continue rebuilding that nation's infrastructure so that a free Iraq can quickly gain economic independence and a better quality of life. Our coalition has already helped Iraqis to rebuild schools and refurbish hospitals and health clinics, repair bridges, upgrade the electrical grid and modernize the communication system.

And now a growing private economy is taking shape. . . . Oil production has reached more than 2 million barrels per day, bringing revenues of nearly $6 billion so far this year, which is being used to help the people of Iraq. . . .

A new Iraq will also need a humane, well-supervised prison system. Under the dictator, prisons like Abu Ghraib were symbols of death and torture. That same prison became a symbol of disgraceful conduct by a few American troops who dishonored our country and disregarded our values.

America will fund the construction of a modern maximum security prison. When that prison is completed, detainees at Abu Ghraib will be relocated. Then with the approval of the Iraqi government, we will demolish the Abu Ghraib prison as a fitting symbol of Iraq's new beginning.

The fourth step in our plan is to enlist additional international support for Iraq's transition.

At every stage, the United States has gone to the United Nations to confront Saddam Hussein, to promise serious consequences for his actions and to begin Iraqi reconstruction.

Today the United States and Great Britain presented a new resolution in the Security Council to help move Iraq toward self-government. . . .

The fifth and most important step is free national elections, to be held no later than next January. . . .

I sent American troops to Iraq to defend our security, not to stay as an occupying power. I sent American troops to Iraq to make its people free, not to make them American. Iraqis will write their own history and find their own way. As they do, Iraqis can be certain a free Iraq will always have a friend in the United States of America. . . .

History is moving, and it will tend toward hope or tend toward tragedy.

Our terrorist enemies have a vision that guides and explains all their varied acts of murder. They seek to impose Taliban-like rule country by country across the greater Middle East. . . .

The failure of freedom would only mark the beginning of peril and violence. But, my fellow Americans, we will not fail. We will persevere and defeat this enemy and hold this hard-won ground for the realm of liberty.

May God bless our country.